JD Sports has been ordered to sell Footasylum by the UK’s Competition and Markets Authority (CMA). The CMA said the acquisition could be a “worse deal” for customers.
In May 2019 the CMA began investigating the 90 million pound acquisition by JD Sports Fashion plc of Footasylum plc, and in a statement said a sale was “the only way to address its competition concerns and protect consumers”.
JD Sports appealed against a ruling by the CMA in September, saying it was “perplexed” by its decision not to include online sales by Nike and Adidas in the UK in its review, reported the BBC.
In an update on Thursday, the CMA found that the takeover of Footasylum would reduce competition even after taking into account the growth in online shopping.
Half of online shoppers surveyed by the competition watchdog said that they would go to JD Sports if they were unable to purchase their usual trainers or joggers at Footasylum.
In its findings the CMA reported it carried out a survey of online customers of both brands in May. The survey found that for both footwear and apparel, JD Sports was by far and away the closest alternative for Footasylum’s online customers. Over 40 percent of Footasylum customers for footwear and half of Footasylum customers for apparel said they would go to JD Sports in the event that they could not shop at Footasylum. These figures were substantially higher than for any other retailer.
The Remittal Online Survey results showed a much lower proportion of JD Sports customers considered Footasylum to be their best alternative. Only 9 percent of JD Sports’ online footwear customers said they would go to Footasylum and 8 percent of its online apparel customers said they would go to Footasylum if they could no longer shop at JD Sports.
These survey results indicate that Footasylum has weakened relative to JD Sports acquisition. JD Sports customers now consider Nike, Foot Locker and adidas as their alternatives than they do Footasylum. Previously Footasylum was the second-best alternative after Nike. Whilst in-store diversion between the Parties may still be higher than online diversion, the CMA consider these changes in online diversion to be informative and consistent with other evidence on market developments.
Acquisition not in best interest of shoppers
Kip Meek, chair of the CMA inquiry group, told the BBC: “The UK boasts a thriving sports fashion market and today’s decision reflects our commitment to keeping it that way.”
“We strongly believe shoppers could suffer if Footasylum stopped having to compete with JD Sports. It is likely they would pay more for less choice, worse service and lower quality.”